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The Damages Directive comes closer: Businesses and consumers to be helped bring claims for losses due to anti-competitive behaviour

The Damages Directive comes closer: Businesses and consumers to be helped bring claims for losses due to anti-competitive behaviour

Businesses and consumers who suffer loss because of the anti-competitive behaviour of others may sue for damages. Some businesses have mounted major actions to claim damages in various courts to recover losses due to cartels, abuses of dominance and other breaches of competition law. The European Union is trying to encourage such actions so as to deter anti-competitive behaviour but also to facilitate the payment of compensation as a way of restoring the competitive balance to the economy.

The Court of Justice of the European Union had acknowledged the right for victims of antitrust infringements to sue for compensation for the harm suffered (e.g., the Manfredi judgment). However, due to national procedural obstacles and legal uncertainty, very few victims currently seek or obtain compensation. Moreover, national rules are widely diverging across Europe and, as a result, the chances of victims obtaining compensation greatly depend on which Member State they happen to sue in.

The European Commission proposed in June 2013 a directive on damages claims. While earlier proposals had a troubled and difficult time, this proposal made progress. After the Commission published its proposal, the Council and the Parliament (the two institutions which would have to adopt the measure) discussed the proposal and suggested amendments. Various informal meetings were then held between the Commission, Council and Parliament (the so-called “trilogies”) to reach a compromise. Representatives of the European Parliament and of Member States' governments agreed on a final compromise text at the end of March 2014 and the Parliament approved the text in April 2014. On 10 November 2014, the Council adopted the proposed directive. The European Parliament had approved in April 2014 a compromise text of the Commission's initial proposal. The Directive has now been signed (on 26 November 2014). Member States will have two years to implement the Directive into their national laws (i.e., by 27 December 2016). Copies of the relevant documents are available at http://ec.europa.eu/competition/antitrust/actionsdamages/documents.html

The Directive will give victims easier access to much of the evidence which they need to prove the damage suffered and more time to make their claims. The Directive would not undermine the leniency/immunity and settlement programmes operated by the EU and Member State competition agencies. Member States would be able to order defendants to disclose evidence when victims claim compensation but such disclosure would have to be proportionate and confidential information would be protected. The directive contemplates that a final decision of a national competition authority finding an infringement will automatically constitute proof of that infringement before courts of the same Member State in which the infringement occurred – it will be interesting to see how this operates in the Irish context where the Competition and Consumer Protection Commission is limited in what it can decide because of various Irish constitutional constraints. Plaintiff victims will have at least one year to claim damages once an infringement decision by a competition authority has become final – this will extend the “limitation periods” because some of the cartels will have been secret and therefore the victims did not know they even had a case to institute. A perennial problem in such cases is known as the “passing on” problem – if A overcharges B because of a cartel in which A is involved then may B sue A for the overcharge where B has passed on the overcharge to C when it sold the goods to C? The directive provides that if an infringement has caused price increases and these have been "passed on" along the distribution chain then those who suffered the harm at the end of the chain will be entitled to claim compensation. The Commission will review the Directive and submit a report to the Parliament and the Council in six years from the entry into force of the Directive.

The right to claim damages for breaches of Irish competition law has been established since 1 October 1991 when the Competition Act 1991 entered into force but there have not been many cases. There are various reasons for such an absence of claims – these reasons include: (a) the absence of many cases being brought by the Irish Competition Authority/Competition and Consumer Protection Commission which would lead to sufficiently sizeable awards for aggrieved claims which would encourage the latter to bring claims; (b) the difficulty of obtaining proof to mount the cases; and (c) uncertainty about the procedural regime. The proposed Directive should help reduce these difficulties to some extent.

For further information please contact a member of our EU, Competition & Procurement Team.